Duke Energy is investing billions to upgrade its power grid, in part responding to unprecedented demand expected from a surge in new data centers. The Charlotte utility giant is adamant, however, that residential customers’ bill will not grow because of those data centers.
Some experts aren’t so sure. That’s already happening to customers of other utility companies around the country, they say.
The rise of artificial intelligence that’s now commonplace is fueling the ravenous power needs of data centers around the Carolinas and nationally. Domestic energy usage by data centers is expected to double or triple within just three years, according to the U.S. Department of Energy.
So how is Duke Energy handling those needs?
The company is adding 13 gigawatts (GW) of capacity over the next five years, with a total cost between $95 billion to $105 billion, CEO Harry Sideris announced during a November earnings call. The plan is across all of Duke Energy’s six-state market, including the Carolinas.
That 13 GW is equal to having capacity to power about 2.3 million homes annually.
The long-term goal, detailed in Duke Energy’s 2025 Carolinas Resource Plan, involves modernizing power generation by both adding more clean energy sources and expanding capacity and efficiency in its electric grid infrastructure. That plan includes new substations and transmission lines in the Carolinas.
The costs cited by Sideris are higher than the on grid modernization plan through 2029 the company had announced in February.
Locations for some of these potential investments are in “preliminary evaluation,” said Duke Energy spokesman Garrett Poorman. He noted that the company’s most significant proposed projects are publicly shared prior to evaluation by the N.C. Utilities Commission, often including local public hearings.
Top NC leaders fighting Duke Energy rate hike
Duke Energy Carolinas covers the western half of the state, including Charlotte, and serves about 2.9 million residential customers. Progress operates in the eastern half, including the Triangle region, serving 1.8 million customers. Both companies also serve parts of South Carolina.
Combined, the utilities serve over 4.7 million customers.
In mid-November, Duke Energy proposed an approximately 15% rate hike for its nearly 5 million customers with Duke Energy Carolinas and Duke Energy Progress. The rate increase would occur between 2027 and 2028, if approved by state regulators.
But top N.C. leaders objected to that rate hike last week.
Attorney General Jeff Jackson said he was intervening in the rate request before the Utilities Commission to “ensure it is necessary.” Gov. Josh Stein quickly backed Jackson, saying he too opposes the hike because it is “simply too high and comes as the company is also retreating on more affordable clean energy.”
Duke Energy previously told the Observer it does not make rate requests lightly, and looks forward to continuing constructive dialog with all parties as the review moves forward next year.
During the earlier earnings call, Sideris reiterated that Duke Energy is focused on ensuring all 10 million of its customers receive service at a fair price, and that “customer value and affordability remain front and center.”
“Our job is to address the needs of all customers,” Sideris said, “from large industrial customers that are competing against a global market to residential customers that are managing their household budgets.
“We’re protecting existing customers through tariff structures and contract provisions for new large load projects,” he said. Tariffs refers to the structured rates the company charges customers for electricity.
How Duke Energy plans to ensure fair power bills
Residential customers won’t be on the hook for huge data center usage, according to Duke Energy.
The company says it plans to implement new terms of service, rate structures and contracts to ensure that large-load customers cover the full costs of serving them. “These customers will pay substantial energy bills, and their rates will be continually reviewed to ensure fairness,” Duke Energy stated in an email to the Observer. “Residential customer rates are not based on proximity to large energy users.”
Duke Energy also is working to manage costs through use of AI and combining Duke Energy Carolinas and Duke Energy Progress utilities. If approved, Sideris said the deal would save retail customers more than $1 billion through 2038. Internally, Duke Energy has established work teams to accelerate the time it takes to meet growing energy needs, according to CFO Brian Savoy.
Just this year, the company signed electric service agreements with data centers for 3 GW, including Digital Realty and Edged, which are making multibillion-dollar investments in North Carolina to support AI infrastructure.
“We’re protecting existing customers through tariff structures and contract provisions for new large load projects,” Sederis said.
Rising electric rates
Nationally, the digital infrastructure boom risks driving up electricity prices for U.S. households an average of 8%, according to a study by Carnegie Mellon University and NC State University released in June. “Policymakers must act now to align infrastructure investment and regulation with this demand surge,” the analysis said.
Legislators and utility providers are looking to shield residents from increased electricity bills and potential blackouts amid rapid data center expansions and the infrastructure upgrades required to support them.
Residential utility bills rose 6% on average nationwide in August compared with the same period the previous year, according to the U.S. Energy Information Administration, cited by CNBC.
Three states that climbed faster than the national average are Virginia, known as “Data Center alley,” as well as Illinois and Ohio. All have a high concentration of data centers.
In North Carolina, the Power Bill Reduction Act, passed in July, overriding Stein’s veto. It had been debated regarding its potential impact on power bills, pitting businesses and residents against each other. The bill delays Duke Energy’s interim 2030 carbon reduction goals and allows the company to charge rate-payers for new power plants before they’re built.
An analysis by N.C. State University found the bill could cost ratepayers up to $23 billion through 2050.
But Duke Energy says the bill helps lower the long-term price customers pay for new power generation, with up to $15 billion in total cost savings.
Energy demand and data centers
Understanding the full impact that surging power demands for electricity that AI-fueled tech is bringing, and its implications for data centers, is an ongoing issue.
Some experts say more power-generating capacity is critical for the U.S.
“If we can’t build the energy infrastructure, we will be really struggling to meet the hype of AI. And I think there’s a real risk that we may not be able to do it in this country,” said Robert Cox, executive director of Energy Production & Infrastructure Center and associate professor of electrical and computing engineering at UNC Charlotte. “To do AI, you need big data centers.”
There are environmental concerns to consider, in addition to power and economic ones.
To meet rising energy needs, Duke Energy wants to extend the life of three North Carolina coal-fired plants at Marshall Steam Station on Lake Norman, Belews Creek in Stokes County and Cliffside in Cleveland County.
“The carbon footprint from data centers is very large because they consume a huge amount of energy, and most of that energy comes from non-renewable resources,” said Srijan Das, a computer science assistant professor at UNC Charlotte. “So they’re creating a lot of CO2 pollution, which leads to climate change.”
Duke Energy is preparing for an additional 2 GW of new data center load across the Carolinas and secured 11 new natural gas turbines, manufactured in Greenville, S.C., to help meet demand. That amount of gigawatts is equivalent to powering about 1.5 million homes a year.
Just last year, Duke Energy officials signed agreements for 2,000 megawatts of new data centers in the third quarter of 2024, the News & Observer in Raleigh reported.
Duke Energy did not specify locations or how much of that capacity is in the Carolinas. But Savoy noted that data center developers are attracted to the Carolinas because more than half of the energy mix is carbon-emissions-free nuclear power.
Other states and electric rates
Across the border in South Carolina, Kansas-based QTS Data Center is investing $1 billion to build a nearly 5.3 million-square-foot data center campus on 400 acres in York County. Company spokeswoman Karen DiMaggio said her conclusion is that “data centers aren’t to blame for higher electric bills.
“States where the power bills are the highest are not states that have a high concentration of data centers,” she said at a Lake Wylie, S.C., community meeting in November.
The average U.S. retail price for electricity is 12.68 cents per kilowatt-hour, according to the U.S. Energy Information Administration. Hawaii has the highest average price in the U.S., paying 38 cents per kWh.
North Carolina and South Carolina are at 11.65 cents and 10.90 cents per kWh, respectively. Still, they are higher than Virginia, with the world’s largest concentration of data centers, which is at 10.62 cents per kWh.
“We recognize that our work to provide affordable energy for customers is never done,” Sideris said. “But we are proud that average rate changes have paced below the rate of inflation over the last decade, and that our rates are well below the national average.”
NC Reality Check reflects the Charlotte Observer’s commitment to holding those in power to account, shining a light on public issues that affect our local readers and illuminating the stories that set the Charlotte area and North Carolina apart. Have a suggestion for a future story? Email [email protected]
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